The art and science of business decision making

As is perhaps obvious to our regular readers, we have recently been spending a lot of time thinking about intergenerational issues. Among the issues that have demanded our attention is the management of a business when more than one generation is involved.

The assumption of power by one generation from its predecessor is the stuff of Sophocles, Freud, and the family across the street. It is also one of the most critical transition issues that faces any business which hopes to succeed beyond the life of its founder. If the transition is managed well, the business can thrive through it and into the future. If it is not managed well, both the transition period and the future can be extremely difficult.

The transition comes to every business, but it can be especially complex in a successful family business, where parent-child issues may mix with educational issues to make decision making, and all of the communications surrounding it, more than a little tumultuous.

As we have mentioned before, one of the best things a successful family business can do to support its future is to insist that the children who want to be involved in the business get outside training and experience. Not only does this approach encourage the development of real competencies, but the perspective it provides on the greater economic environment can be invaluable to the business as it moves into an ever-changing future.

However, this same education and other outside experience can create, or exacerbate, tensions between the generations. Not only are the two generations likely to have different perspectives based in their different experiences – for example, the older may value the importance of face-to-face network building for marketing purposes, while the younger may be more interested in internet-based viral marketing – but these perspectives may also be accompanied by fundamental differences in the ways the two generations approach decision making.

The founder has probably been very successful making pragmatic decisions, based on his or her own perceptions and a nearly intuitive assessment process. The younger generation, on the other hand, has probably learned analytical tools based on theories that are completely unfamiliar to the entrepreneur.

Conversations in which one party argues from experience and instinct while the other argues from analysis based in assumptions and relationships that may be counter-intuitive can be frustrating. However, well conducted, these conversations can be among the most creative and productive that any business has.

The great motivating process in science has long been the inductive development of theories that can then be deductively tested and refined. The same can be done in business: an idea that “feels” like a good one to the intuitive participants can be tested and re-worked so that implementation can be more successful than anyone might have imagined. Careful discussion and testing can also avert an implementation that might be less effective than hoped.

The critical issue in these discussions is to remember that intuition and reason, experience and analysis should be viewed as additive, not mutually exclusive. While we could argue that the onus for ensuring this kind of productive discussion falls on the younger generation as a simple matter of respect, we could equally argue that the greater experience of the older generation makes it their responsibility.

However, our own experience suggests that these conversations are most useful when all parties take seriously their responsibility to contribute, understand, and appreciate all perspectives in the decision making process. When everyone remembers that both generations are able to focus on the shared goal of the long-term good of the business, the process of testing intuition with analysis, and theory with practical reality, the conclusions can be far more robust and chances of success, much higher.